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What Causes Poverty in San Marino?

San Marino, which is said to be the world’s oldest republic, is a tiny country landlocked by Italy. At only 23.6 square miles, San Marino is the fifth smallest country in the world, only larger than Vatican City, Monaco, Nauru and Tuvalu. It is also one of the richest countries in the world, with an estimated 2016 GDP per capita of $59,500. Despite its wealthy status, the 2008 recession, from which the country is still recovering, has significantly increased poverty in San Marino.

San Marino‘s main economic activities are tourism, banking and the manufacture and export of different goods such as clothing, ceramics, fabric, wine and spirits. As it is surrounded by Italy, most of San Marino’s economic sectors are highly supported by this nation; in fact, 90 percent of San Marino’s export market is supported by Italy. As Italy also suffered from the 2008 recession, its demand for imports from San Marino has lessened, which has in turn weakened San Marino’s economy.

After the recession, San Marino’s strong economy took a downward turn. Unemployment – which had been at its lowest in 2007 at three percent – jumped to 4.5 percent by 2009 and reached its peak of 9.2 percent in 2015. While poverty is not a major issue in San Marino compared to many other countries, the recession certainly caused a notable increase.

Although San Marino’s poverty rate is low enough that it is not necessarily significant enough to be recorded, it is likely that such a rapid increase in unemployment led to hardship for a significant portion of San Marino’s population. Increases in unemployment cause greater stress for the individual and strain the government, as it puts more pressure on the government to support those who are unemployed. Additionally, it weakens the economy further, as those who are unemployed lose purchasing power. Since San Marino’s peak unemployment in 2015, unemployment has started to drop, with the unemployment rate in 2016 at 8.6 percent.

Although the recession caused an increase in poverty, the government of San Marino has been working to curb the effects of the recession by eliminating its status as a tax haven. As other countries have bounced back from the recession, demand for goods from San Marino has increased as well. Hopefully, as more countries start recovering, this will also help San Marino’s economy recover so that progress can be made regarding its poverty rate.

Mary Kate Luft

Photo: Flickr


San Marino, a small, independent republic inside Italy has had its fair share of economic struggle. The Great Recession’s effects on San Marino began in earnest during 2009 and has had a major impact on the tourism drive in the Republic of San Marino. Since San Marino heavily relies on tourism as an economic stimulus, the drop in traffic increased the poverty in San Marino.

As a measure to boost the economy, the Italian government began cracking down on people who had been using San Marino’s banks as tax havens. Italian celebrities and other non-residents of San Marino took advantage its low tax rate of 17 percent and the secrecy policies implemented by San Marino banks. This allowed them to hide their money, thus avoiding their home country’s taxes.

Multiple members of San Marino’s most important bank, Cassa di Risparmio della Repubblica di San Marino, were arrested on laundering charges. San Marino has signed several transparency agreements with the Organization for Economic Co-operation and Development (OECD) and is reported to have displayed dedication to the OECD’s standards.

While the elimination of tax havens is positive for global economic growth, it had a negative immediate impact on poverty in San Marino. The San Marino economy relied heavily on its status as a tax haven.

The Republic has made economic improvements in recent years. The GDP has grown by about one percent primarily due to an increase in the demand for domestic goods. The International Monetary and Financial Committee reports that unemployment rate in San Marino dropped from 9.3 percent in 2013 to 8.5 percent at the end of 2016. To put things into perspective, the U.S. had an unemployment rate of 4.7 percent at the end of 2016.

The Republic plans to implement a freeze on the 2017 budget which is estimated to save 2 million euros as well as the addition of value-added tax in 2019.

Although much more progress has yet to be made in the Republic of San Marino, its cooperation with the OECD and the steady growth it has made in the past few years promise economic strength for the tiny republic. It is hopeful that poverty in San Marino and the unemployment rate will decrease in kind over the years to come.

Emma Tennyson

Photo: Flickr